31 U.S.C. § 3124

Exemption from taxation

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(a) Stocks and obligations of the United States Government are exempt from taxation by a State or political subdivision of a State. The exemption applies to each form of taxation that would require the obligation, the interest on the obligation, or both, to be considered in computing a tax, except—(1) a nondiscriminatory franchise tax or another nonproperty tax instead of a franchise tax, imposed on a corporation; and(2) an estate or inheritance tax.(b) The tax status of interest on obligations and dividends, earnings, or other income from evidences of ownership issued by the Government or an agency and the tax treatment of gain and loss from the disposition of those obligations and evidences of ownership is decided under the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.). An obligation that the Federal Housing Administration had agreed, under a contract made before March 1, 1941, to issue at a future date, has the tax exemption privileges provided by the authorizing law at the time of the contract. This subsection does not apply to obligations and evidences of ownership issued by the District of Columbia, a territory or possession of the United States, or a department, agency, instrumentality, or political subdivision of the District, territory, or possession.(Pub. L. 97–258, Sept. 13, 1982, 96 Stat. 945; Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095.)

Historical and Revision Notes
Revised Section	Source (U.S. Code)	Source (Statutes at Large)
3124(a)	31:742.	R.S. § 3701; Sept. 22, 1959, Pub. L. 86–346, § 105(a), 73 Stat. 622.
3124(b)	31:742a.	Feb. 19, 1941, ch. 7, § 4, 55 Stat. 9; Mar. 28, 1942, ch. 205, § 6, 56 Stat. 190; restated June 25, 1947, ch. 147, 61 Stat. 180; Sept. 22, 1959, Pub. L. 86–346, § 202, 73 Stat. 624.

In subsection (a), before clause (1), the words “Except as otherwise provided by law, all . . . bonds, Treasury notes, and other” are omitted as surplus. The words “political subdivision of a State” are substituted for “municipal or local authority” for clarity and consistency. The word “applies” is substituted for “extends” for clarity. The words “directly or indirectly” are omitted as surplus. In clause (1), the word “instead” is substituted for “in lieu” for clarity.

In subsection (b), the words “shares, certificates, stock, or other” and “sale or other” are omitted as surplus. The words “The tax status of . . . and the tax treatment of . . . is decided under the Internal Revenue Code of 1954 (26 U.S.C. 1 et seq.)” are substituted for “shall not have any exemption, as such . . . shall not have any special treatment, as such, except as provided under the Internal Revenue Code of 1954” for clarity. The words “on or after March 28, 1942” and 31:742a(a)(1st sentence words after semicolon related to the United States Maritime Commission) are omitted as executed. The last sentence is substituted for 31:742a(a)(last sentence) for clarity. The words “any political subdivision thereof” are omitted as included in “agency or instrumentality”. The text of 31:742a(b) and (c) is omitted as unnecessary.

Editorial NotesAmendments

1986—Subsec. (b). Pub. L. 99–514 substituted “Internal Revenue Code of 1986” for “Internal Revenue Code of 1954”.

Notes of Decisions

Cited in 87 cases (2 in the last 5 years), 1983–2026 · leading case: Am. Fam. Mut. Ins. v. Wisconsin Dep't of Revenue, 586 N.W.2d 873 (Wis. 1998).

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Am. Fam. Mut. Ins. v. Wisconsin Dep't of Revenue, 586 N.W.2d 873 (Wis. 1998). · cites it 17× “(1987-88), 1 as a "nondiscriminatory franchise tax" within 31 U.S.C. § 3124 (a)(1) (1991). We reverse the decision of the court of appeals.”

First Am. Nat'l Bank of Knoxville v. Olsen, 751 S.W.2d 417 (Tenn. 1987). · cites it 18× “, violates 31 U.S.C. § 3124 (a) and impairs the obligation of a contract.”

Bank of Guam v. United States, 578 F.3d 1318 (Fed. Cir. 2009). · cites it 4× “§ 61 (including interest' in definition of “gross income”), USGOs are “exempt from taxation by a State or political subdivision of a State,” 31 U.S.C. § 3124 (a) 2 ; see 31 *1322 C.F.”

Comptroller of the Treasury, Income Tax Div. v. First United Bank & Trust, 578 A.2d 192 (Md. 1990). · cites it 22× “The Taxpayer contends that this income is exempt from State income tax because of (1) the provisions of 31 U.S.C. § 3124 (a) and (2) the treatment under Maryland law of a shareholder's beneficial interest in the assets of a Massachusetts business trust.”

State Dep't of Assessments & Taxation v. Maryland Nat'l Bank, 531 A.2d 294 (Md. 1987). · cites it 14× “[ 1 ] The State submits that, when interpreted in the light of history, § 1433 has no application to a franchise tax and that the controlling statute is 31 U.S.C. § 3124 (a) (1982). The latter provides: Stocks and obligations of the United States Government are exempt from…”

Am. Bank & Trust Co. v. Dallas Cnty., 463 U.S. 855 (1983). · cites it 4× “§ 742 , then was replaced by 31 U. S. C. § 3124 (a) (1982 ed.). Act of Sept.”

Antonio Gumataotao v. Dir. of Dep't of Revenue & Taxation, 236 F.3d 1077 (9th Cir. 2001). · cites it 5× “3) Title 31 U.S.C. § 3124 (a), which precludes states from taxing the interest on federal bonds, prevents Guam from taxing U.”

Schwinden v. Burlington N., Inc., 691 P.2d 1351 (Mont. 1984). · cites it 10× “HISTORY Prior to 1978, Montana counties were empowered by state law to impose a property tax on bank stock shares.”

Nebraska Dep't of Revenue v. Loewenstein, 513 U.S. 123 (1994). · cites it 6× “If the income that taxpayers earn by participating in such agreements constitutes interest on federal securities, then the taxation violates 31 U. S. C. § 3124 (a), which exempts interest on “obligations of the United States Government” from taxation by States.”

Cambridge State Bank v. Roemer, 457 N.W.2d 716 (Minn. 1990). · cites it 10× “The court found that the inclusion of interest from federal obligations in the calculation of the banks' franchise tax was discriminatory and, therefore, in violation of 31 U.S.C. § 3124 (a) (1982) (formerly numbered § 742) [1] because interest from certain state obligations was…”

Borg v. Dep't of Revenue, 774 P.2d 1099 (Or. 1989). · cites it 7× “On appeal of the Department’s denial, the Oregon Tax Court held that taxpayers’ income attributable to the Trust’s investments in United States obligations was exempt from state taxation by virtue of 31 USC § 3124 (a), but the court found the statute inapplicable to their income…”

Dept. of Revenue v. First Union Nat. Bk., 513 So. 2d 114 (Fla. 1987). · cites it 9× “63, Florida Statutes (1985), on the ground that it violated the Federal Public Debt Statute, 31 U.S.C. § 3124 (1982). The trial court upheld the statute and entered summary judgment against the banks.”

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— 31 U.S.C. § 3124(a) — 1 case

First Am. Nat'l Bank of Knoxville v. Olsen, 751 S.W.2d 417 (Tenn. 1987). “, violates 31 U.S.C. § 3124 (a) and impairs the obligation of a contract.”

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